| | The
significant differences relating to intangible assets between IFRS and US GAAP
are as explained below:
 | | GOODWILL
Prior to January 1, 1995, the Group wrote off goodwill directly to equity, in
accordance with IFRS existing at that time. Changes in IFRS effective 1995 required
goodwill to be capitalized and amortized, but did not require prior period restatement.
The difference of USD 2 945 million relates to goodwill on various acquisitions
prior to 1995 and in particular to the acquisition of Gerber Products Company
in 1994. The net book value of goodwill under US GAAP attributable to Gerber Products
Company was USD 2 870 million as of December 31, 2005 and 2004. Gerber Products
Company goodwill is reviewed annually for potential impairments however, this
did not result in the Group needing to record a charge in 2005 and 2004.
Up to March 31, 2004, IFRS did not consider that IPR&D was an intangible asset
that could be separately recognized. Accordingly it was included in goodwill for
IFRS purposes. Under US GAAP, IPR&D is considered to be a separate asset that
needs to be expensed immediately following the acquisition as the feasibility
of the acquired research and development has not been fully tested and the technology
has no alternative future use. The balance sheet difference on account of IPR&D
that was included in goodwill under IFRS is USD 488 million at December 31, 2005
(2004: 458 million). Since March 31, 2004 goodwill
and intangible assets deemed to have an indefinite useful life are no longer amortized
on a regular basis under IFRS but tested for impairment. Therefore, in 2005 there
is no amortization charge under IFRS. Under US GAAP, this accounting treatment
was already adopted in 2002. The balance sheet difference on account of the timing
difference between the adoption of FAS 142 and IFRS 3, is USD 202 million at December
31, 2005 (2004: USD 220 million). All goodwill was
tested for impairment during 2005 with the fair values of the businesses determined
using the expected present values of future cash flows. The balance sheet difference
of goodwill between IFRS and US GAAP on account of impairments is USD 183 million
at December 31, 2005 (2004: USD 155 million) which is due to differences in the
goodwill impairment calculation and due to different carrying values in the balance
sheet. The process of evaluating goodwill involves making judgments and estimates
relating to the projection and discounting of future cash flows. This evaluation
is sensitive to changes in the discount rate. An increase to discount rates is
likely to result in a significant impairment charge under US GAAP. | |
